Relying on Vladimir

Reagan’s team convinced the Saudis to strike an almost fatal blow to the Soviet Union in the early 80’s.  The Saudis had the capacity to flood the world oil market, and they did.  They drove the spot price of crude, at one point, to $8 a barrel.  90% of the Soviets’ hard currency came from oil.  It cost the Saudis $1 to produce a barrel.  I think it cost the Soviets about $12.

Because it lost almost all of its hard currency income, the Soviets could no longer afford to compete with the Western military  build up.  When their campaign to prevent the deployment of Pershing missiles in Western Europe failed, they tried to talk Reagan out of his Star Wars missile defense system.  That failure, added to their ignominious retreat from Afghanistan, meant they had only one option left.  Start a land war in Europe, with their superior ground forces.  That would be insane, and was not considered.  They’d lost the Cold War to Reagan.  Oil beat them, just as it had beaten the Germans twice and the Japanese once before.  The unique, and indispensable,  American contribution to victory in the Second World War was made by our oil industry.

World War One proved that access to a secure supply of oil was a necessary condition of fighting a twentieth century war.  The Germans signed the Armistice on 11-11-18 because their army could no longer function.  It had no oil, and they had no choice.  One of the principal architects of American oil policy in this war was a California oil man named Mark Requa.  He helped win the war.  When I met Babbie, she lived on Requa Road in Piedmont, California, in the biggest house I’d ever been inside.  You can read about all this in Daniel Yergin’s  The Prize.  If you haven’t read it you really don’t understand modern geopolitics.  It’s also a fun read, because Yergin knows how to write.  Take a minute and compare world events with the last 70 years of world oil prices.

Oil bottomed at $27 a barrel, and has crawled back to $37.35 at this moment.  I’m watching it on Fox Business.  COP will track it until people figure out the impact on this particular stock of a Cruz Presidency.  Then it will take off.  The only thing that could go wrong would be a company specific screw up, or a collapse in the price of oil.  I’ve looked at COP’s recent behavior, and it seems to me the people running it know exactly what they’re doing.

So the only real downside to COP is the price of oil, and my ally in driving it up is Vladimir (rhymes with redeemer) Putin.  He’s a world historical figure, as was Vlad the Impaler, and Vladimir the Great, who brought Christianity to Russia in the 10th century.  Putin is having an enormous sculpture of Vladimir the Great erected near the Kremlin. It will be one of the great landmarks of Moscow.  This is the man he wants to be.  Believe it nor not, the former KGB man wants a restoration of the Russian Orthodox Church as a center of Russian culture.  This man, and his country, are not an enemy of the United States.

The United States has no enemies now, except radical Islam, which also poses a serious threat to Russia.  Tocqueville understood 170 years ago that much of world history would depend on the future competition between the United States and Russia.  Our superior political system has allowed us to win that contest. It is now time for a world wide strategic alliance between Russia and the United States.  Since Russia is located in Eurasia, it has many potential rivals, China and Western Europe foremost.  As an island nation, geopolitically speaking, we have none.  Our goal should be to contain China, in a strategic alliance with Russia , Japan and South Korea.

To cement our partnership with the Japanese, we need to open up ANWR in Alaska, get all the oil that everyone thinks is in there piped to  Valdez, and then shipped to Japan and Korea, its natural markets.  This will help free these countries from dependence on the Middle East for energy, and bind them closely to the USA.  Together, the United States, Russia, South Korea and Japan can control the Dragon.  China has always been the Middle Kingdom, largely disinterested in the rest of the world.  That’s changed, but they still have no appetite for conquest.  There’s no reason we all can’t get along.

As for the Germans and the rest of the Western Europeans, they are in long term decline.  At some point they’ll realize the European Union was a colossal mistake, and that each country in Europe needs to reassert it national sovereignty, control its borders and its currency, and advance the interests of its own people.   Until then nothing can be done. I don’t think it’s too late, but it’s the work of a generation.  It may or may not happen.  We should do what we can to encourage it, but never be allowed to be drawn into a conflict with Russia.  Russia is not going to invade as long as it has a long term strategic alliance with us, so NATO is a useless relic.

Russia is now a dominant force in the Middle East.  What Putin’s up to, I have no idea.  But I know what he wants. He wants to jack up the price of oil, as does every other country in the Middle East.  He’s clever and ruthless.  He needs to convince the Saudis, the swing producer, to cut production.

I think he figures it out, so, long term, I’m an oil bull.

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